*The Commerce Journal>>>Personal Finance

Certificates of deposit calculations?

ok, given an APY% for X months and a $P principal in a CD, how do I calculate the ending amount. I think I know how, but this was always the crap that I hated in math class, so I'm not completely sure which of the slightly different methods to use.

The EASY way is to ask the bank when you open the CD.

APY (annual percentage YIELD) is the effective interest rate AFTER adjusting for any compounding. For a 12 month CD, just multiply the APY by th principle to get total interest. For ANY other time frame you actually need the ACTUAL interest rate and how often interest compounds. You CAN'T determine those from the APY.

Simple Interest Formula, no compounding:
APY%/12 months x $P x no. of months = total interest. Interest + $P = ending amount.

Example:
APY% = 6%, $P = $1000, time = 10 months:

.06/12 = .005 monthly interest RATE.
.005 x $1,000 = $5 monthly interest.
$5 per month x 10 months = $50 total interest.
$50 interest + $1,000 = $1,050 ending amount.

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